In response to the announcement of Facebook's initial public offering (IPO), IG Markets has created a 'grey market' for its highly anticipated float.
The biggest technology IPO since Google's in 2004, the Facebook float has created a frenzy of interest in the market, with some analysts suggesting the company could be capitalised between US$75 and US$100 billion.
The 'grey market' is priced by IG Markets based on where its clients believe the market will trade once it lists on an exchange, and enables traders to trade CFDs* on Facebook's stock before it lists. All open positions will settle on Facebook's market capitalisation at the close of its first day of trade.
As with grey markets previously offered by IG Markets (some examples include the floats of Queensland Rail, Tatts group and Telstra), the level of the Facebook share CFDs will be driven by supply and demand. Consequently, it will be a good indicator of Facebook's final float valuation.
While the majority of speculators are optimistic, more cautious investors will be keenly monitoring the initial three months after the float when the social network company may be vulnerable to regulatory changes, changing market sentiment and competitor strength.
For traders who have an interest in Facebook and a view on the valuation at which it will float, IG Markets' grey market on the stock is available twenty-four hours a day through IG Markets' trading platform, PureDeal.
The level to which IG Markets' clients can trade will be the expected market capitalisation of the company as opposed to its share price. Clients can trade off a bid/offer spread based on their expectations for Facebook's closing market capitalisation at the end of the first trading day. While the top end of the expected IPO range is US$100 billion, clients are currently anticipating firm upside on the first day, with Tuesday's close (February 15 in Australia) suggesting a market capitalisation of US$116.5 billion.
It is also worth pointing out that IG Markets' clients will also be able to buy and sell Facebook shares on the secondary market as a CFD once the company has listed.
Head of IG Markets Asia Pacific, Tamas Szabo, commented, "given the widespread market interest in Facebook's IPO, it is with great pleasure that IG Markets offers this service to our clients. The flexibility of CFDs, along with 24-hour access to global markets made possible through online trading, make our grey market an excellent way to take advantage of the growing speculation over Facebook's impending float."
Created by Mark Zuckerberg, Facebook is the most widely-used social networking site on the internet with over 845 million global users.
Its 2011 revenue was US$3.71 billion, an 88% increase year-on-year, and total capitalisation on December 31, 2011 was US$2899 million. In 2011 Facebook also made US$1 billion in profit, 85% of which was acquired through advertising.
About IG Markets
IG Markets is Australia's number one CFD provider,** and offers CFDs across a wide range of markets, including over 7,000 global share CFDs, indices, forex, commodities, options, binaries and more.
IG Markets advises that trading CFDs may not be suitable for everyone, since CFDs are a geared product and can result in losses that exceed an initial deposit, and that product disclosure statements are available from http://www.igmarkets.com.au
is a contract that enables traders to speculate on the changing prices of financial instruments. CFDs on Facebook shares do not entitle traders to take physical ownership of shares in Facebook; they are a simply a vehicle through which traders can speculate on the expected value of Facebook's stock once it floats.
** 40% of active CFD traders have an account with IG Markets - Investment Trends May 2011 Australia CFD Report.